An Insider's Guide to The Parts of a Car Deal

How Hard Can It Be?

Every day, thousands of people hit car lots with hopes of taking home their next vehicle. Whether it's a dream car, a family car or a commuter car, the fact remains that a vehicle is one of the largest purchases in a person's life. Nonetheless, after years of working in the industry, I became aware that both beginners and experienced car buyers approached their purchases without some very basic information and, usually, with a very negative outlook toward the salesperson, the dealership and the car buying process. Still, they all don their game faces and stroll to the lot ready for battle.

Now, I am a firm believer that knowledge is power, so I am going to help you with your next car. After all, thousands of people stumble through it every day. How hard can it be?

Research

If you skip this step, you are dooming yourself to a hard day at the dealership. Research is your foundation; it is the base knowledge that you bring to the negotiating table. Visiting a car lot is NOT research. It is entering the lion's den unarmed. The only time that you can do research at the lot is afterhours. Do your research online, at your bank and through your friends and family. Online, you can compare different makes and models of cars, the features that are available, price ranges, your trade-in car's value, your credit score, payment estimates, and dealership reviews. At your bank, you might get pre-approved for a car loan, easily one of the strongest tools at your disposal. The bank might also recommend a good dealership to you. Your friends and family can give you information about their experience with different manufacturers and dealerships. They might even have "a car guy" or "a friend in the business," which can make the buying process less combative. Do your research and you will spend more time buying a car as opposed to being sold a car.

Meet, Greet and Interview

This step happens when you walk on the lot and meet a salesperson or manager. Don't panic, don't be intimidated and don't be rude. In order to buy a car, you will have to talk to somebody and salespeople aren't your enemy. If you are looking for a particular person, ask for him or her; you should know ahead of time that your referral is there. If you don't have specific person in mind, show the salesperson some courtesy and answer some questions. Do NOT get into discussions about specifics like desired payments, prices or credit. Do answer questions about what you want, how you will use the car, and your lifestyle. You might learn that a different vehicle can also meet your needs. This stage is where you and the salesperson get to know each other. Sure, there is a commission on the table, but that doesn't mean that you need to dislike the salesperson. You go to a job every day and hope to make money, so don't begrudge the salesperson for doing his job. Remember, if the salesperson treats you well, he could become your very own "friend in the car business." If you get a bad feeling with the salesperson - he doesn't listen to you, she gives off a "slick" vibe, he can't answer basic questions about the car - don't be afraid to ask the sales manager for a replacement.

Presentation and Demonstration

Once the salesperson fully understands your needs and desires, she will talk to the sales manager and pick a car or two for you to drive. Focus more on the things that will affect the drive than aesthetics like color or seat material. A V-6 engine will drive differently than a 4-cylinder car, but a red car and a white car will drive the same. Think about how you will be using the car. Can you get the seat into a comfortable place? How are the blind spots? Will the kids be comfortable? Can your car seats fit? Will the trunk hold your stroller, your sales displays, etc.? Does it have Bluetooth? How easy are the controls? Can you figure them out without an engineering degree? Can you park the vehicle? Don't be afraid to ask questions and don't be afraid to speak up when you find something that you don't like. I had many customers who loved the look of a particular vehicle, but the blind spots were terrible. Sure, many of them still bought the vehicle, but I wasn't surprised when some came back for something different a few months later. During the test drive, the salesperson will try some "trial closes" to gauge how close you are to buying the vehicle. If she's really good, you might not even notice. Don't worry, though. It doesn't matter. Either you like the car or you don't. Go ahead and be honest. At the end of the test drive, the salesperson may ask you to park on the "Sold Line." This direction is definitely a trial close. Presumably, you'll raise an objection at this point if you don't like something about the car you are driving. Go ahead and park. You can still ask any questions that you have.

Negotiation

Once you have decided upon a specific car to buy, the salesperson will lead you inside for the negotiation. If he hasn't done so, he may ask if you have a trade-in vehicle. Conventional wisdom says that you should leave the trade-in secret at this point, but I am not sold on that idea. Ultimately, your research should have given you an idea of what your deal will look like. As long as you get to that deal, it shouldn't matter how the dealership got there. Let them give a little more for your trade if they're going to charge more for the car, or vice versa. Keep the big picture in mind and hold to one number in particular. THE number is the Amount Financed. Negotiation will be easy if you focus on your desired Amount Financed. Ideally, you will get the exact car that you want for that number. Sometimes, the exact car is not on the lot and you will have your first true obstacle. Since dealerships want to sell the cars that they have on hand, they might be willing to make a better deal on a car they have in stock. Are you willing to take your second or third color choice to get to your deal? Are you willing to pay more (and wait) for a car that is not available today? Can you accept aftermarket leather instead of factory leather? The goal is remembering and getting as close as possible to the desired Amount Financed.

Trade-In

If you decided to leave your trade-in vehicle out of the price negotiation, you will insert this step as a separate negotiation. By keeping the trade separate, you might be able to get a little more for your trade. However, if you have completely minimized the sale price of the new vehicle, the dealership will not give you a great number for your trade-in. Hopefully, you can afford pulling the trade if you arrived at a good selling price for the new car, but find that you don't get your desired number for your trade. When researching the value of your trade, make sure that you look at the right numbers. Retail value is the price a dealer would put on a used car. Person-to-person, or private, sale value is the price that an individual could expect to put on a used car. Trade-in value is the price that a dealer will pay for a used car. Unless you polish your trade weekly and keep it covered in a garage, expect that your trade will fall somewhere between Good and Fair Condition. Obvious major damage or accidents can drop the value to Poor Condition. Remember, the dealership is not emotionally attached to the car they are selling, so you should not allow emotional attachment to enter into your estimation of the trade vehicle. Once again, the target of this negotiation is your Amount Financed.

Finance

Now that you have finished dealing with your salesperson, a closer and/or a sales manager, you will move to the Finance Office. Hopefully, you have focused on the Amount Financed and avoided all discussions of monthly payments, even if you based your research around a monthly payment goal. The Finance Office is where your credit comes into play. It is also where your visit to your bank becomes your best friend. Armed with your credit score and an interest rate that you CAN get, you can judge the dealership's finance options. Invariably, the Finance Manager will present you with a few packages and add-on products like extended warranties, maintenance plans and anti-theft products. All of these add-on products affect your Amount Financed. Do not lose sight of that all-important number. You will also need to pay attention to the interest rate, the term (or length) of the loan, and the monthly payment. If the dealership has aggressive lenders, you might find that you can get to your desired payment for the term that you want with some added protection. You NEVER have to take the added protection to get financed, but if you can get something extra and stay in the right ballpark overall, you may want to consider taking a maintenance plan or an extended warranty. The advantage of buying products in the Finance Office is that you can roll them into your monthly payment instead of putting them on a higher-interest credit card or paying cash for them. Since you can cancel most products, the disadvantage of taking the products is that the "refund" applies to the end of the loan, so your car payment will not drop if you decide to cancel the extended warranty a week or two later. The Finance Department is where everything becomes official, so pay attention and make sure that you understand the numbers, particularly the Amount Financed, the interest rate, the term and the monthly payment. If the Finance Department doesn't meet your goals, fall back on your pre-approval from your bank and finish the deal using your own financing.

Delivery

Whew! You made it through the salesperson, the closer, the Sales Manager and the Finance Manager. Now, it's time to hop in the new car and drive off, right? Not so fast! You have one last step called "Delivery." This step is when you get to see the car after a wash and detail, but it may take some time before the car is ready. I assure you that people are working frantically to get your car clean and ready to take home. Once the car is ready, do a quick walk around the car to make sure that there are no dents, dings, scratches, etc. on the exterior. Look at the inside, too, checking the seats and carpet for stains, rips, tears, etc. If the car is satisfactory, take some time to sit in the car with your salesperson so he or she can explain some of the more technical features in more detail. What good is Bluetooth if you don't know how to pair your phone or how to answer? After you are relatively comfortable with the car, you will be ready to finally take the car home.

On average, people will have spent four hours at the dealership before they get to delivery. You will finish sooner if you pay attention to these steps. There are whole books on this topic, but I wanted to give you a quick and easy guide to the process. I hope that it has been helpful. Look for future articles that address some of the areas in greater detail. In the meantime, Happy Motoring!